US CPI Inflation Data: What to Expect and How it May Impact the Crypto Market
The US Bureau of Labor Statistics is set to release the August US CPI inflation report on September 11, with economists forecasting a 0.4% month-over-month (MoM) rise in inflation, up from 0.1% in July. The annual inflation is expected to hold steady at 3.4%, similar to July headline CPI inflation data. Meanwhile, core CPI is projected at 0.2% MoM, similar to 0.2% previously. Core CPI inflation, which excludes food and energy, is expected to have dropped to 2.4%, falling from 2.5% Core CPI inflation print last month.
Wall Street Giants' Estimates: A 3.4% Median CPI Inflation Forecast
Several Wall Street giants, including JPMorgan, Goldman Sachs, Barclays, Morgan Stanley, Wells Fargo, and others, have estimated a 3.4% median CPI inflation forecast. Moody's and Nomura expect easing to 3.3%. Meanwhile, the August core CPI median estimate is 0.2%, similar to economists' forecasts. These estimates suggest that the market is expecting a moderate increase in inflation, which may have implications for the Federal Reserve's monetary policy decisions.
Implications for the Federal Reserve and the Crypto Market
The August US CPI report is one of the most important inflation prints in months, with the outcome potentially deciding whether the Fed hikes rates at next week's FOMC meeting. The Fed is now heavily focused on a single upcoming CPI print, according to Goldman Sachs Short Macro Trading's Brian Bingham. He notes that Fed Waller's recent dovish remarks confirmed the FOMC Board skews dovish. Brian Bingham argues that if a Fed rate hike is priced above 50%, bond markets would interpret a Fed hold as a policy error.
The crypto market is in panic mode over rising uncertainty, with the CME FedWatch Tool showing a 69% probability of a 25 bps Fed rate hike in September. Fed rate hike odds have climbed after US PPI inflation came in hot at 5.4%. JPMorgan expects the Fed to deliver its first 25 bps rate hike in December, bringing the policy rate to 3.75-4.0%.
Oil Prices and the Crypto Market
Oil prices are falling more than 1.50% to near $101 per barrel today, after rising massively amid renewed strikes by the US and Iran. BIT (formerly Matrixport) predicted a Fed pause could trigger a Q4 rally in the crypto market, with US debt surpassing $40 trillion and Treasury yields near 5%. There are key catalysts for capital rotation into Bitcoin and gold, BIT analyst noted. Bitcoin price has rallied 22% and gold by 9.4% as the macro regime shifted to early cyclical reflation, where the US dollar weakens and commodity prices rise.
What to Watch Next: The Crypto Market's Reaction to the US CPI Inflation Data
The crypto market and Bitcoin are slightly rebounding ahead of CPI inflation data. At press time, BTC price bounced from $76,545 to trade near $77,210. However, trading volume has tumbled more than 11% over the past 24 hours, indicating traders remain cautious. For traders looking to hedge against interest rate volatility, the best regulated prediction markets in US offer direct trading on Fed rate outcomes and CPI prints.
The outcome of the US CPI inflation data will have significant implications for the crypto market, and traders should be prepared for potential market volatility. The market's reaction to the data will be closely watched, and investors should be prepared to adjust their strategies accordingly.
